April 21, 2025 • 16 mins
Tax strategy is the most overlooked aspect of financial planning, yet it could save you thousands over your lifetime by minimizing your total tax burden rather than just focusing on this year's bill.
• Roth conversions let you pay taxes at potentially lower rates now to avoid higher taxes later in life
• Asset location matters – keep growth investments in Roth accounts and more conservative assets in brokerage accounts
• Health insurance premium planning can drastically reduce your healthcare costs through ACA subsidies
• Capital gains harvesting allows married couples to realize up to $96,700 in gains tax-free each year
• The standard deduction adds another $30,000 of tax-free money, meaning you could potentially generate $126,700 with zero tax liability
If this was helpful, please reach out at ari@rootfinancialpartners.com. If you'd like a custom strategy, you can apply to work with Root Financial Partners. For those 5-10 years from retirement, check out the Early Retirement Academy for software, courses and tools to help you prepare.
Create Your Custom Early Retirement Strategy Here
Get access to the same software I use for my clients and join the Early Retirement Academy here
Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.
“Early Retirement – Financial Freedom” is a podcast produced by Root Financial Partners, an SEC-registered investment adviser. The content provided is for informational and educational purposes only. It should not be interpreted as investment, legal, or tax advice. I may reference planning situations based on real client experiences, but they’ve been simplified for clarity. Always consult your own financial advisor before making decisions.
Listening to this podcast does not create or imply an advisory relationship with Root Financial. Investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. Testimonials and endorsements do not reflect all client experiences and are not compensated. Learn more at our website or by reviewing our Form ADV at https://adviserinfo.sec.gov.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Tax strategy is the most overlooked aspect of
financial planning, in myopinion.
Now, this is something that I'mreally excited to talk about,
because one of my earlyexperiences in the financial
services was all about taxstrategy, specifically municipal
bonds.
For those of you who do notknow my full story, I started at
a company where I people talkabout this when people retire
early and they have the abilityto massage their income, because
(00:27):
generally, people that retireearly have a variety of accounts
.
It's not just a 401k althoughthat's the case sometimes but
traditionally there's abrokerage account, there's a
401k, there's cash, maybethere's inheritance or real
estate, and you want tounderstand how do we move all
these pieces to optimize our taxperspective Now, transparently
(00:51):
and this might sound bad, butit's just the truth.
Your CPA might be the nicestperson in the world, but their
job is to try to do as good asthey possibly can to save you in
taxes this year, so you paythem again next year, and
there's nothing wrong with that.
I pay a CPA to do that todayfor myself, but their job is
generally once again looking forthat year so that you pay them
again next year.
They are not always and I saythat with a disclaimer, because
(01:14):
some CPAs are awesome who dothis, but they're not always
looking at.
How do we minimize yourlifetime tax liability liability
, and that is what I'mconsistently thinking about for
my clients.
I don't want to save someone$100 in a given year if I could
save them $500 over three years.
Simple example, but I'm goingto be walking you through today
the main tax strategies that Iwould consider at least looking
(01:37):
at.
If you're interested inretiring early or if you're
going, I'm already retired whatshould I be doing to minimize my
tax bill over my lifetime?
So, if you don't already know,my name is Ari Talbleeb.
I'm a certified financialplanner and host of this podcast
, the Early Retirement Show.
I love getting to do this and Irely on your feedback.
So, if you can't tell, I getreally excited recording these
(02:00):
episodes.
Some of you have asked if I'mon drugs.
No, I'm not on drugs.
I don't even take coffee.
That's how weird I am.
But what I want you tounderstand is I truly rely on
your feedback and an email thatcame in recently had asked me to
try to keep some of thesetopics a little more concise,
because sometimes I'll do mystories and it becomes a 20, 30
minute episode and I'll behonest with you, sometimes I get
(02:22):
lost having fun in it.
I try to, of course, stay ontopic as much as I can, but I
love this stuff, so today I'mgoing to try to keep it a
shorter episode If you go.
Hey, this was really morehelpful for me.
You didn't scatter my brain, Ifelt it was more on topic.
Great, I want to know that.
If you went, I kind of missedthe stories I actually like.
When they're 20, 30 minutes, Ifind I get a Also.
(02:45):
I want to know that.
So I'm going to go through eachof these.
It's going to be a ton of fun.
Let's hop in.
So number one when it comes totax strategy is Roth conversions
.
The reason I bring this upfirst is it doesn't apply to all
of you, so why would I bring itup first?
Well, I don't want you to worryabout it if it doesn't apply to
you.
Roth conversions are awesome,and I use the example of
(03:07):
cauliflower when I talk aboutRoth conversions.
What you're doing is you'regoing.
I'm happy to pay a little bitin taxes today, I'm happy to eat
a little cauliflower.
So in the future, I don't haveto eat a ton of cauliflower when
I'm going to want steak and I'mgoing to want pasta, I'm going
to want all the good stuff.
So my personal fan fan favoriteI don't know why I said fan
favorite, but my personalfavorite is I'm a pink sauce guy
(03:31):
.
So if you guys have a differentpreference there, you can just
tune out right now.
No, I'm just kidding.
But from a Roth conversionperspective, in all reality this
is going to apply to you.
If you have one big big thingcoming.
These are called RMDs requiredminimum distributions.
If you're going to be forced totake out more money than you
need, something like a Rothconversion might be really
(03:56):
applicable.
Because what you're doing isyou're saying I'm happy to move
money from this 401k that I'vebeen putting money into for the
last 30 years to make thesedollars Roth and tax-free.
So, for example, let's assume Iwant to retire today and I'm 50
years old.
Well, if I have 2 million bucksin my 401k, if that keeps
growing when I'm 75 and I haveto take money out, I might be
(04:16):
forced to take out somethinglike $400,000.
If it keeps growing, well, I'mprobably going to spend less
when I'm 75 versus when I'm 50.
I'm probably going to havesocial security.
Other things may have grown, soI might not need 400,000.
It's not a bad thing.
But what happens is, if I donothing I'm talking about all of
that money, that 400,000, thatgets taxed at your highest
(04:39):
marginal bracket.
So I might be a big baller inretirement.
I might be still living inCalifornia.
I don't want to pay 40, 50%taxes on that money.
I worked really hard to getthat.
So what people do is they go on50 right now, maybe because of
my current bracket, while I'mretiring early and I'm in a low
bracket.
Maybe I happily go pay 22% intaxes Once again, just federal,
(05:02):
and maybe another 8% in state.
I'm happy to pay 30% taxestoday, to not pay 40 or 50% in
the future, and as this moneygrows, I pay no more taxes on it
ever again.
And if something happens to me,my spouse inherits it.
They don't have to worry abouttaxes.
My kids inherit it they don'thave to worry.
So it's, yes, something that'sfor you, but it's generally a
(05:26):
tax arbitrage play, or it's foryour family or children.
So some of you don't need toworry about this.
You might have a million bucksin your 401k and 2 million bucks
in a brokerage account.
Well, your 401k you're going tobe living off of that at some
point.
You might not need to convertmoney and I don't need you to
unnecessarily do somethingbecause it feels like some fancy
(05:48):
tax technique that you heard onsome podcast.
So don't just do it for thesake of doing it.
I have a lot of videos andexamples of when to do it.
But this is the first thing youshould consider, because when,
right now, markets are beingvolatile, if markets are down,
it can be an advantageous timeto consider a conversion.
So that's number one.
Number two and I'm alreadyabout seven minutes in, so I'm
(06:10):
trying to keep this concise, butyou can see I'm not very good
at that Asset location.
This is a really easy one andyou can all probably do this in
three minutes if you take thisadvice.
So asset location is basicallysaying where should I own my
best assets?
What the heck does that mean?
Okay, so ready.
Let's assume you have a Roth IRA, which most of you do.
(06:37):
Do we want bonds or cash inyour Roth IRA?
No, no, no.
That's your best account.
You're not going to want totouch that for a long time.
So you should make sure thatRoth account assuming, once
again, it is in your risktolerance should be growing like
crazy.
So personally, I have 100%equities in my Roth and I
probably always will.
That's the best account I'vegot for long-term growth.
But let's think about yourbrokerage account, or what I
call your superhero.
This is an important account.
(06:58):
If I retire at 50, that's thefirst account I'm going to go to
to live off of this money.
So I don't want that investedlike crazy because if it's
invested for maximum growth,it's going to have more
volatility, which means there'sa risk that Markets are down and
I have to sell at a loss, whichyou do not want to do.
So generally, you want yourbrokerage account to have the
(07:21):
absolute lowest amount comparedto your other accounts in
equities.
However, if you determineyou're more than five years out
from retirement and you don'tneed income right now, your
brokerage account could stillhave 100% equities.
The tricky thing becomes well,what if you have one stock with
a really big gain?
Do you sell it just to have asafer asset, like you heard on
(07:42):
this podcast?
No, that's cookie cutter advice, so I can't give one example
that applies to everyone.
But generally you want yourbrokerage or your superhero
accounts to be safer in lessvolatile assets compared to your
IRA.
And then you want your IRA evensafer compared to your Roth,
because do you remember the lastpoint I just talked about RMDs
(08:02):
required minimum distributions.
Well, those only apply to yourpre-tax accounts like an IRA or
a 401k.
So those accounts, we don'twant them growing for maximum
capacity because we're going tobe forced to take money out of
that in the future whether wewant to or not.
So that's.
Number two is asset location.
You can quickly use thesoftware that I use for my
(08:24):
clients that you can all get inthe description of this episode,
or you can just look at yourstatement and see do I have any
things that are not growing forme like they should in my Roth
IRA?
And if I'm about to retire, ismy brokerage account invested
for too much growth?
Should I put some money in alittle bit of a safer asset?
That's something I wouldconsider.
Number three, a big one healthinsurance premiums.
(08:46):
I have some clients that arespending legitimately a few
hundred bucks a month onhealthcare and others that spend
a thousand plus, and thedifference is how you create
income in retirement Now, if youare taking money from a 401k to
live and you're 60 years old,so Medicare is not there yet you
need health care.
This causes anxiety.
I'm not going to retire, no way.
(09:08):
I don't have health care yet.
You are cheating yourself.
It's something you need to planfor.
It can be a significant cost,but you can be really strategic
to try to reduce how much you'repaying through what's called
ACA subsidy planning.
This is basically how do youmassage your income to stay
under a certain threshold sothat you receive subsidies from
the government.
So I have clients that havelegitimately millions of dollars
(09:30):
that are paying a very smallamount in healthcare because
they're pulling from theirbrokerage account, which allows
them to pay capital gains taxeson it, which is way less than
ordinary income.
So they are happy to pull froma brokerage account instead of a
401k or an IRA, because itkeeps their taxable income much
lower, which is essentiallytelling the IRS hey, here's my
(09:51):
income for the year and they go.
Well, that's pretty low, here'sa subsidy.
Now you don't want to overoptimize here, where now you're
in Medicaid territory, showingno income, which I've seen as
well.
So you want to be careful here.
Now, if your Act, ittemporarily.
Temporarily it removed the 400percent federal poverty level
(10:22):
cap, and that's through 2025,meaning higher income households
may still qualify if theirinsurance costs exceed eight and
a half percent of householdincome.
So I have examples where I gothrough deeper case studies on
this.
So if you want to check thoseout, I have a lot of YouTube
videos where I go through deepercase studies on this.
So if you want to check thoseout, I have a lot of YouTube
videos where I go through those.
So just search Ari TalbleafHealthcare I'll come up.
(10:44):
The last point I want to bringup is a big one.
It's called capital gainsharvesting, which is another
name for tax gain harvesting,which is another name for how do
I pay 0% in taxes in retirement?
This, in my opinion, is thecoolest thing about tax strategy
, which allows you to truly payzero percent in taxes.
So if you have income and I'mgoing to pull this up right now
(11:06):
on my screen so I can read theexact numbers with you but the
reason I think this is sovaluable is you truly can retire
early and you can pay 0% intaxes on some really healthy
gains.
What does that mean?
Well, assuming you've held astock for over a year, what you
can do is, let's assume you'remarried, finally jointly.
(11:28):
You have what's called along-term capital gains tax rate
.
For anyone who's marriedfinally jointly, this is below
$96,700.
You can pay 0% taxes on thosegains.
What the heck does that mean?
So let's say we bought Applestock for a dollar Actually,
let's use a better example$1,000.
And now it's worth $100,000.
(11:49):
That's $99,000 in gains.
I'm a CFP.
You guys saw that math rightthere.
Pretty cool, right.
So now you are wondering whatdo I do?
Well, in your head you'reprobably chalking it up to go
I'm going to have to pay sometaxes on some of these gains,
because that's just how thisworks.
The reality is the first $96,700in gains gets taxed at 0%,
(12:14):
which means if you have no otherincome which I'm just using
hyperbole for this example,because you're going to have
dividends or interest orpart-time work, but pretend your
income is zero, I don't let youkeep working and you have a
brokerage account where youbought Apple stock for $1,000
(12:34):
and now it 0% taxes on, whichmeans the remainder the other
$2,300, that you are paying at15%, because now you're in the
15% bracket.
So any income from 96,701 allthe way to 600,050, you pay 15%
taxes on.
So why is this important?
(12:55):
Well, if you retire early andyou're 50 or 55 and you've got a
brokerage account, you couldkeep working and bring in
$150,000 a year through yourtraditional job, or you could
try to sell stock and pay notaxes on the first $96,000.
Plus, you have your standarddeduction, which, as of now, is
(13:16):
about exactly $30,000, whichmeans, legitimately, you could
try to generate $126,700tax-free, pay no taxes.
And I would ask my clients thefollowing Would you rather go
work a stressful job where youmake $250,000 after taxes and
401k and insurance, you'renetting $170,000, or would you
(13:39):
rather have $126,000 wherethere's no work at all?
You can do whatever you want.
You can play golf, you can gotravel and you can now take
these proceeds and do whateveryou want.
You could go live off of them.
You could go reinvest them andjust reset your cost basis.
So basically, you could, if youwanted to go sell Apple stock,
pay no taxes, go buy Apple stockand all you did was reset your
(14:02):
basis so as it grows, you're notgoing to have to pay as much in
taxes.
So this is an often overlookedstrategy because people know tax
loss harvesting.
They don't often know tax gainharvesting.
So I hope that you learnedsomething with this episode.
I try to keep it under 15minutes.
I'm right about there.
There's going to be someimportant disclosures and things
(14:23):
that are added, of course, inpost production to these
episodes, but that's it.
I hope you guys enjoyed thisone.
If this was helpful.
I like hearing from you, soplease shoot me a note, ari, at
rootfinancialpartnerscom Ifyou're going.
I want a strategy.
I need a custom strategy.
I don't wanna do this tax stuff, but it's interesting.
I think it's gonna apply to mysituation.
You can reach out to apply towork with us.
(14:46):
And then, finally, we have theEarly Retirement Academy, which
is, if you're just looking forsoftware and different courses
and tools and strategies.
I put that together for peoplethat are a few years out from
retirement, let's call it 10years.
I want to retire early one day.
I don't have $2 million, so Ican't work with Root quite yet,
but I still am interested inthis.
That's where you can go toenroll in that, learn more about
(15:08):
what you need to do to be in agood spot to work with Root in
the future and begin retiringearly, spending time on what the
heck you really want to do,which, for some of you is
continuing to work Awesome.
Others of you are hey, I'd loveto walk away.
So hopefully this episoderesonated.
I'll see you guys next time.
Thank you all, as always, forlistening to the Early
Retirement Podcast.
(15:29):
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this.
Now, please be smart about this.
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney.
(15:50):
Please be smart about this.
This, none of this, should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here.
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom, if
(16:11):
you, of course, want me toaddress a specific case study or
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
least give you some insight.
That's it.
Thanks, guys.
Tax strategy is the most overlooked aspect of
financial planning, in myopinion.
Now, this is something that I'mreally excited to talk about,
because one of my earlyexperiences in the financial
services was all about taxstrategy, specifically municipal
bonds.
For those of you who do notknow my full story, I started at
a company where I people talkabout this when people retire
early and they have the abilityto massage their income, because
(00:27):
generally, people that retireearly have a variety of accounts
.
It's not just a 401k althoughthat's the case sometimes but
traditionally there's abrokerage account, there's a
401k, there's cash, maybethere's inheritance or real
estate, and you want tounderstand how do we move all
these pieces to optimize our taxperspective Now, transparently
(00:51):
and this might sound bad, butit's just the truth.
Your CPA might be the nicestperson in the world, but their
job is to try to do as good asthey possibly can to save you in
taxes this year, so you paythem again next year, and
there's nothing wrong with that.
I pay a CPA to do that todayfor myself, but their job is
generally once again looking forthat year so that you pay them
again next year.
They are not always and I saythat with a disclaimer, because
(01:14):
some CPAs are awesome who dothis, but they're not always
looking at.
How do we minimize yourlifetime tax liability liability
, and that is what I'mconsistently thinking about for
my clients.
I don't want to save someone$100 in a given year if I could
save them $500 over three years.
Simple example, but I'm goingto be walking you through today
the main tax strategies that Iwould consider at least looking
(01:37):
at.
If you're interested inretiring early or if you're
going, I'm already retired whatshould I be doing to minimize my
tax bill over my lifetime?
So, if you don't already know,my name is Ari Talbleeb.
I'm a certified financialplanner and host of this podcast
, the Early Retirement Show.
I love getting to do this and Irely on your feedback.
So, if you can't tell, I getreally excited recording these
(02:00):
episodes.
Some of you have asked if I'mon drugs.
No, I'm not on drugs.
I don't even take coffee.
That's how weird I am.
But what I want you tounderstand is I truly rely on
your feedback and an email thatcame in recently had asked me to
try to keep some of thesetopics a little more concise,
because sometimes I'll do mystories and it becomes a 20, 30
minute episode and I'll behonest with you, sometimes I get
(02:22):
lost having fun in it.
I try to, of course, stay ontopic as much as I can, but I
love this stuff, so today I'mgoing to try to keep it a
shorter episode If you go.
Hey, this was really morehelpful for me.
You didn't scatter my brain, Ifelt it was more on topic.
Great, I want to know that.
If you went, I kind of missedthe stories I actually like.
When they're 20, 30 minutes, Ifind I get a Also.
(02:45):
I want to know that.
So I'm going to go through eachof these.
It's going to be a ton of fun.
Let's hop in.
So number one when it comes totax strategy is Roth conversions
.
The reason I bring this upfirst is it doesn't apply to all
of you, so why would I bring itup first?
Well, I don't want you to worryabout it if it doesn't apply to
you.
Roth conversions are awesome,and I use the example of
(03:07):
cauliflower when I talk aboutRoth conversions.
What you're doing is you'regoing.
I'm happy to pay a little bitin taxes today, I'm happy to eat
a little cauliflower.
So in the future, I don't haveto eat a ton of cauliflower when
I'm going to want steak and I'mgoing to want pasta, I'm going
to want all the good stuff.
So my personal fan fan favoriteI don't know why I said fan
favorite, but my personalfavorite is I'm a pink sauce guy
(03:31):
.
So if you guys have a differentpreference there, you can just
tune out right now.
No, I'm just kidding.
But from a Roth conversionperspective, in all reality this
is going to apply to you.
If you have one big big thingcoming.
These are called RMDs requiredminimum distributions.
If you're going to be forced totake out more money than you
need, something like a Rothconversion might be really
(03:56):
applicable.
Because what you're doing isyou're saying I'm happy to move
money from this 401k that I'vebeen putting money into for the
last 30 years to make thesedollars Roth and tax-free.
So, for example, let's assume Iwant to retire today and I'm 50
years old.
Well, if I have 2 million bucksin my 401k, if that keeps
growing when I'm 75 and I haveto take money out, I might be
(04:16):
forced to take out somethinglike $400,000.
If it keeps growing, well, I'mprobably going to spend less
when I'm 75 versus when I'm 50.
I'm probably going to havesocial security.
Other things may have grown, soI might not need 400,000.
It's not a bad thing.
But what happens is, if I donothing I'm talking about all of
that money, that 400,000, thatgets taxed at your highest
(04:39):
marginal bracket.
So I might be a big baller inretirement.
I might be still living inCalifornia.
I don't want to pay 40, 50%taxes on that money.
I worked really hard to getthat.
So what people do is they go on50 right now, maybe because of
my current bracket, while I'mretiring early and I'm in a low
bracket.
Maybe I happily go pay 22% intaxes Once again, just federal,
(05:02):
and maybe another 8% in state.
I'm happy to pay 30% taxestoday, to not pay 40 or 50% in
the future, and as this moneygrows, I pay no more taxes on it
ever again.
And if something happens to me,my spouse inherits it.
They don't have to worry abouttaxes.
My kids inherit it they don'thave to worry.
So it's, yes, something that'sfor you, but it's generally a
(05:26):
tax arbitrage play, or it's foryour family or children.
So some of you don't need toworry about this.
You might have a million bucksin your 401k and 2 million bucks
in a brokerage account.
Well, your 401k you're going tobe living off of that at some
point.
You might not need to convertmoney and I don't need you to
unnecessarily do somethingbecause it feels like some fancy
(05:48):
tax technique that you heard onsome podcast.
So don't just do it for thesake of doing it.
I have a lot of videos andexamples of when to do it.
But this is the first thing youshould consider, because when,
right now, markets are beingvolatile, if markets are down,
it can be an advantageous timeto consider a conversion.
So that's number one.
Number two and I'm alreadyabout seven minutes in, so I'm
(06:10):
trying to keep this concise, butyou can see I'm not very good
at that Asset location.
This is a really easy one andyou can all probably do this in
three minutes if you take thisadvice.
So asset location is basicallysaying where should I own my
best assets?
What the heck does that mean?
Okay, so ready.
Let's assume you have a Roth IRA, which most of you do.
(06:37):
Do we want bonds or cash inyour Roth IRA?
No, no, no.
That's your best account.
You're not going to want totouch that for a long time.
So you should make sure thatRoth account assuming, once
again, it is in your risktolerance should be growing like
crazy.
So personally, I have 100%equities in my Roth and I
probably always will.
That's the best account I'vegot for long-term growth.
But let's think about yourbrokerage account, or what I
call your superhero.
This is an important account.
(06:58):
If I retire at 50, that's thefirst account I'm going to go to
to live off of this money.
So I don't want that investedlike crazy because if it's
invested for maximum growth,it's going to have more
volatility, which means there'sa risk that Markets are down and
I have to sell at a loss, whichyou do not want to do.
So generally, you want yourbrokerage account to have the
(07:21):
absolute lowest amount comparedto your other accounts in
equities.
However, if you determineyou're more than five years out
from retirement and you don'tneed income right now, your
brokerage account could stillhave 100% equities.
The tricky thing becomes well,what if you have one stock with
a really big gain?
Do you sell it just to have asafer asset, like you heard on
(07:42):
this podcast?
No, that's cookie cutter advice, so I can't give one example
that applies to everyone.
But generally you want yourbrokerage or your superhero
accounts to be safer in lessvolatile assets compared to your
IRA.
And then you want your IRA evensafer compared to your Roth,
because do you remember the lastpoint I just talked about RMDs
(08:02):
required minimum distributions.
Well, those only apply to yourpre-tax accounts like an IRA or
a 401k.
So those accounts, we don'twant them growing for maximum
capacity because we're going tobe forced to take money out of
that in the future whether wewant to or not.
So that's.
Number two is asset location.
You can quickly use thesoftware that I use for my
(08:24):
clients that you can all get inthe description of this episode,
or you can just look at yourstatement and see do I have any
things that are not growing forme like they should in my Roth
IRA?
And if I'm about to retire, ismy brokerage account invested
for too much growth?
Should I put some money in alittle bit of a safer asset?
That's something I wouldconsider.
Number three, a big one healthinsurance premiums.
(08:46):
I have some clients that arespending legitimately a few
hundred bucks a month onhealthcare and others that spend
a thousand plus, and thedifference is how you create
income in retirement Now, if youare taking money from a 401k to
live and you're 60 years old,so Medicare is not there yet you
need health care.
This causes anxiety.
I'm not going to retire, no way.
(09:08):
I don't have health care yet.
You are cheating yourself.
It's something you need to planfor.
It can be a significant cost,but you can be really strategic
to try to reduce how much you'repaying through what's called
ACA subsidy planning.
This is basically how do youmassage your income to stay
under a certain threshold sothat you receive subsidies from
the government.
So I have clients that havelegitimately millions of dollars
(09:30):
that are paying a very smallamount in healthcare because
they're pulling from theirbrokerage account, which allows
them to pay capital gains taxeson it, which is way less than
ordinary income.
So they are happy to pull froma brokerage account instead of a
401k or an IRA, because itkeeps their taxable income much
lower, which is essentiallytelling the IRS hey, here's my
(09:51):
income for the year and they go.
Well, that's pretty low, here'sa subsidy.
Now you don't want to overoptimize here, where now you're
in Medicaid territory, showingno income, which I've seen as
well.
So you want to be careful here.
Now, if your Act, ittemporarily.
Temporarily it removed the 400percent federal poverty level
(10:22):
cap, and that's through 2025,meaning higher income households
may still qualify if theirinsurance costs exceed eight and
a half percent of householdincome.
So I have examples where I gothrough deeper case studies on
this.
So if you want to check thoseout, I have a lot of YouTube
videos where I go through deepercase studies on this.
So if you want to check thoseout, I have a lot of YouTube
videos where I go through those.
So just search Ari TalbleafHealthcare I'll come up.
(10:44):
The last point I want to bringup is a big one.
It's called capital gainsharvesting, which is another
name for tax gain harvesting,which is another name for how do
I pay 0% in taxes in retirement?
This, in my opinion, is thecoolest thing about tax strategy
, which allows you to truly payzero percent in taxes.
So if you have income and I'mgoing to pull this up right now
(11:06):
on my screen so I can read theexact numbers with you but the
reason I think this is sovaluable is you truly can retire
early and you can pay 0% intaxes on some really healthy
gains.
What does that mean?
Well, assuming you've held astock for over a year, what you
can do is, let's assume you'remarried, finally jointly.
(11:28):
You have what's called along-term capital gains tax rate
.
For anyone who's marriedfinally jointly, this is below
$96,700.
You can pay 0% taxes on thosegains.
What the heck does that mean?
So let's say we bought Applestock for a dollar Actually,
let's use a better example$1,000.
And now it's worth $100,000.
(11:49):
That's $99,000 in gains.
I'm a CFP.
You guys saw that math rightthere.
Pretty cool, right.
So now you are wondering whatdo I do?
Well, in your head you'reprobably chalking it up to go
I'm going to have to pay sometaxes on some of these gains,
because that's just how thisworks.
The reality is the first $96,700in gains gets taxed at 0%,
(12:14):
which means if you have no otherincome which I'm just using
hyperbole for this example,because you're going to have
dividends or interest orpart-time work, but pretend your
income is zero, I don't let youkeep working and you have a
brokerage account where youbought Apple stock for $1,000
(12:34):
and now it 0% taxes on, whichmeans the remainder the other
$2,300, that you are paying at15%, because now you're in the
15% bracket.
So any income from 96,701 allthe way to 600,050, you pay 15%
taxes on.
So why is this important?
(12:55):
Well, if you retire early andyou're 50 or 55 and you've got a
brokerage account, you couldkeep working and bring in
$150,000 a year through yourtraditional job, or you could
try to sell stock and pay notaxes on the first $96,000.
Plus, you have your standarddeduction, which, as of now, is
(13:16):
about exactly $30,000, whichmeans, legitimately, you could
try to generate $126,700tax-free, pay no taxes.
And I would ask my clients thefollowing Would you rather go
work a stressful job where youmake $250,000 after taxes and
401k and insurance, you'renetting $170,000, or would you
(13:39):
rather have $126,000 wherethere's no work at all?
You can do whatever you want.
You can play golf, you can gotravel and you can now take
these proceeds and do whateveryou want.
You could go live off of them.
You could go reinvest them andjust reset your cost basis.
So basically, you could, if youwanted to go sell Apple stock,
pay no taxes, go buy Apple stockand all you did was reset your
(14:02):
basis so as it grows, you're notgoing to have to pay as much in
taxes.
So this is an often overlookedstrategy because people know tax
loss harvesting.
They don't often know tax gainharvesting.
So I hope that you learnedsomething with this episode.
I try to keep it under 15minutes.
I'm right about there.
There's going to be someimportant disclosures and things
(14:23):
that are added, of course, inpost production to these
episodes, but that's it.
I hope you guys enjoyed thisone.
If this was helpful.
I like hearing from you, soplease shoot me a note, ari, at
rootfinancialpartnerscom Ifyou're going.
I want a strategy.
I need a custom strategy.
I don't wanna do this tax stuff, but it's interesting.
I think it's gonna apply to mysituation.
You can reach out to apply towork with us.
(14:46):
And then, finally, we have theEarly Retirement Academy, which
is, if you're just looking forsoftware and different courses
and tools and strategies.
I put that together for peoplethat are a few years out from
retirement, let's call it 10years.
I want to retire early one day.
I don't have $2 million, so Ican't work with Root quite yet,
but I still am interested inthis.
That's where you can go toenroll in that, learn more about
(15:08):
what you need to do to be in agood spot to work with Root in
the future and begin retiringearly, spending time on what the
heck you really want to do,which, for some of you is
continuing to work Awesome.
Others of you are hey, I'd loveto walk away.
So hopefully this episoderesonated.
I'll see you guys next time.
Thank you all, as always, forlistening to the Early
Retirement Podcast.
(15:29):
I love getting to host theseshows and make different content
for you guys every single week.
I've not missed a single weekin years and that is because I
love getting to do this.
Now, please be smart about this.
Before you actually execute anystrategy that you see me talk
about or hear me talk about,should I say Please talk to your
financial advisor, your taxpreparer, your estate attorney.
(15:50):
Please be smart about this.
This, none of this, should beconstrued as financial advice.
This is for fun, educational,informational purposes only.
Once again, just quickdisclaimer here.
Guys, please be smart aboutthis.
Appreciate you listening, asalways, and you can, of course,
submit a question on my website,earlyretirementpodcastcom, if
(16:11):
you, of course, want me toaddress a specific case study or
topic.
I will not promise I can get toit, but I respond to every
single person and if I find itwill be helpful for a lot of
people, I will absolutely makean episode on it, at the very
least give you some insight.
That's it.
Thanks, guys.
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